Is Amazon Invincible?

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Apple suffered a stunning defeat in court over ebooks and previously we witnessed a bloodbath at Barnes & Noble for having gotten its ebook strategy wrong. This makes many wonder whether Amazon is invincible.

Amazon has been the 800 pound gorilla of book retail for some time, but to some the behemoth form Seattle is looking more and more like Godzilla. There are many in the publishing industry — in New York City, London, Tokyo, Paris and Madrid — who are genuinely scared when they look at Amazon’s market share. It has 70%-to-80% market share for ebooks sales and about a 50% market share for books sold online (that’s ebooks *and* printed books sold via the Internet). This dominance in not just a U.S. phenomenon, but is appearing in more and more countries around the world. The notion that local players might get a head start on Amazon has proven to be false. Amazon has become the No. 1 in most of the countries it has set its sight on and the number of countries is rapidly increasing. Amazon enjoys immense scale advantages and books are a global business. Amazon’s scale advantages are not unique to the US. Amazon is a globally competitive company.

Of course, from a consumer perspective, none of this really matters. Consumers love Amazon. Amazon has an immense range and choice of titles that delight customers (advantage No. 1); it has a trusted relationship with consumers and the credit card details for over 100 million individuals (advantage No.2); and, last, but not least, it has one of the easiest to use buying and reading platforms across the widest range of devices (advantage No. 3). Being the first company to bring a killer reading device — the Kindle — to market did not hurt, either. Tablets may rule but Amazon is mastering the world of tablets and smartphone with finesse, too. It may even sell more books through the iPad to Mac fans than Apple does. That is no mean feat!

There is a Silicon Valley saying that that Google didn’t beat Microsoft by building a better computer operating system and Facebook didn’t beat Google by building a better search engine. By the same token, nobody will beat Amazon by building a better “Get the book in 60 seconds” e-commerce platform. Yet, the history of technology also tells us that technological dominance in technology is extremely ephemeral. Today’s top dog is tomorrow’s underdog.

So, where is Amazon weak?

— Amazon still struggles with social and this was maybe one of the prime drivers of its Goodreads acquisition.

— Amazon has been around for a long time (by the standards of the Internet) and its users don’t like changes to the Amazon user interface. This means Amazon cannot easily retaliate, if a competitor were to emerge with a different user interface for discovering, buying and reading books (so maybe a much better reading ecosystem might lead to a competitor emerging – Readmill maybe?).

— Amazon’s systems are built for speed. This is a dictate of e-commece, so any competitor that deploys a user friendly system that is more leisurely can make very different engineering choices. Amazon has to produce recommendations and load new pages in microseconds or users abandon the site. Twitter was a service we forgave endless outages because we were addicted to it. Nobody is addicted to Amazon. Amazon is just convenient.

— Amazon is obsessively secretive about its data. Due to its competitive streak it hates sharing data, but we live in a much more open world where data-sharing is becoming the foundation for new services. Author’s are thirsty for data, so Amazon’s NSA-style approach to secrecy may damage its own long-term interest. Lets see what companies like Wattpad may bring about (itself rumored to be the next Amazon acquisition target — if you can’t beat them, buy them, a skill at which Amazon is a samurai master).

Is there a force or company that may bring Amazon down? Maybe not, but the next “cool thing” may just be around the corner.

Exciting times ahead!

Andrew Rhomberg

About Andrew Rhomberg

Andrew is the founder of Jellybooks, a start-up focused on exploring, sampling and sharing ebooks. He previously worked at txtr (whitelabel ebook retail platform), Skype (internet telephony), Reciva (internet radio), gate5 (now Nokia Maps), and Shell (oil). He holds a science Ph.D. from MIT. Follow him on Twitter at @arhomberg.

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15 thoughts on “Is Amazon Invincible?

  1. Enjoyed the piece. Although it does feel like Amazon is invincible — as you describe, there are always opportunities. New retailers can’t “out-Amazon” Amazon, but they can come up with different and innovative ways to grab customers. Yes, exciting times!

  2. Well like anything, change is inevitable. A company that just focuses on books and book selling might be the key. A company that understands the needs of its indie writers better would be nice. So in reality what’s needed is a company all about books and authors, and not toasters, vacuum cleaners, computers and products that would be better left to Walmart

  3. “Hey, honey… what word can I use to grab people’s attention and make them want to read my post?”

    “Mmmm… how about ‘stunning’?”

    “Oooh. That’s a good one!” [type, type, type…]
    ____________________

    It always angers me when people try to whip up interest in a subject by using hyperbole, or in this case an outright lie.

    I’m not sure that there was anyone anywhere who was truly stunned by the judge’s ruling in the Apple case a few days ago. Certainly Apple’s lawyers weren’t, nor was anyone else in the courtroom. The judge had indicated from the start what her ruling probably would be (a bit of an ethics problem right there, but never mind), and she codified it for the record in her ruling.

    As for the “bloodbath” at Barnes & Noble…? All I’ve heard is that they lost a lot of money and so they fired the guy responsible. Hardly surprising (it happens all the time) and hardly a bloodbath.

    The rest of the post was interesting, though.

  4. Amazon is NOT invincible !
    Books are created ‘whole’, sold ‘whole’ but more often than not are consumed partially or not at all. Text books, reference books, how-to, self-help, business books – are not really intended for cover-to-cover reading. But even with fiction – according to recent Goodreads study – over 60% of people don’t finish books they start.

    The charging model used by Amazon (and everyone else) is based on the production pattern, and NOT on the consumption pattern. People buy whole books, and only later find out whether they read them and to what extent.

    If we can create an environment where the charging model is based on the CONSUMPTION pattern, where people pay for what they actually read, we can offer a winning value proposition, give readers total freedom of choice, and create a significant dent in Amazon’s dominance.

    This is exactly what Total Boox does. We give the user the following choice:
    • If you know exactly what you want to read, and certain you’ll read it cover-to-cover – go to Amazon. Great service. Great selection.
    • If you are not sure what you want, not certain you’ll read the book cover-to-cover, or if you want to take 100 books on your next vacation and decide on the beach what to read – come to us.

    It is extremely hard to catch the Amazon bus. But it is possible to build an alternative route, where beautiful vehicles will flourish.

    • I think one has to be very cautious about that Goodreads stat. I have many books on my Goodreads profile marked as “started”, but because I don;t use Goodreads all that much, so never marked them as “finished” even though in real life i finished reading them cover to cover. What I – and others – enter into Gooreads and what we do in *real life* are two very different thing. There is also plenty of evidence that ebooks are more readily abandoned than printed books (they don’t “call at you” like printed books), which is why Kobo data is also slightly misleading.

      As for the business model of selling books by what we read, I say “publishing is an extremely conservative industry, changing business models in publishing is extraordinarily hard. ebooks succeeded in large part because they were a sustaining innovation in many ways and because Amazon was already a very large trading partners for many publishers”

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  7. the source is “of the record” interviews with a couple of publishers large and small (somewhat of a UK bias though)

    the question was always “How much of your revenue across print books, ebooks and audio books is accounted for by Amazon?”

    the answers ranged from 50% to near 70%

    when asking self-published authors the answer would often be: >90%

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